Thinking of filing for bankruptcy? As an individual, you have options: either a Chapter 7 or Chapter 13 bankruptcy. It all depends on your circumstances. Here, we discuss Chapter 7 bankruptcy and if it's the right one for you.
As you review this information, one thing can't be understated enough: bankruptcy is hard work. Regardless of which chapter you file under, you'll have to participate in credit counseling, deal with creditors, among other things. You have to be committed to it, and that's why having an attorney can be more beneficial: advice and guidance throughout the entire process so you remain on top of things and keep the process moving along.
Who Qualifies for Chapter 7 Bankruptcy in Arizona?
If you are an individual and burdened with debt and have no means to pay it now or quite possibly in the future, Chapter 7 bankruptcy may be right for you. To weed out individuals who qualify and who don't, a test was developed many years ago in 2005. This test is known as the Means Test.
The Means Test is basically a formula that uses Arizona's median income to determine whether you have the capability to repay your debt. If your income falls below the median income, then you automatically qualify for Chapter 7 bankruptcy in Arizona. If your income is above the median income, you have to determine what your monthly disposable income is. These calculations can sometimes be complicated depending on your financial situation.
- You need to add your total income together, and this includes wages, spousal support, and other forms of income; and then
- You subtract the following from your total income to determine your disposable income:
- daily household expenses (e.g., food, clothing)
- healthcare costs
- housing (e.g., rent or mortgage)
- utilities (e.g., electricity, gas, water, sewer)
- transportation (e.g., public transportation, gas)
- auto payments
- insurance (e.g., auto or life insurance premiums)
- any court-ordered payments (e.g., child support)
- miscellaneous expenses (e.g., education)
If your disposable income is more than enough to cover your debts over a 5-year repayment period, then you fail the Means Test. You pass it if your disposable income is not enough.
If you fall within one of three groups then you do not have to pass the Means Test. These three groups are:
- Disabled veterans who incurred debts while on active duty
- Members of the military reserve or National Guard; or
- Individuals with a minimum of 50 percent of debt incurred by a business and not consumer-related.
At the Law Offices of Shawn B. Hamp, we will help you determine if you qualify for Chapter 7 bankruptcy or if another option may be in your best interest.
What's the Process to File Chapter 7 Bankruptcy in Arizona?
The process to file Chapter 7 bankruptcy is relatively straightforward and goes something like this:
- Determine if you qualify for Chapter 7 bankruptcy.
- Put together all your financial documents.
- Complete a credit counseling course.
- Complete bankruptcy forms.
- File the bankruptcy documents.
- Complete a financial-management course.
- Prepare for the 341, also known as the creditor's meeting.
- Attend a creditor's meeting.
- Your discharge is entered by the court – typically 4 months after the case was filed.
- The bankruptcy trustee determines if you have assets to liquidate or not, and if you do, the assets are liquidated and the funds are provided to the creditors.
- Trustee files a final report with the court.
- The case is closed.
Again, this is a summary of what happens during a Chapter 7 bankruptcy, but each case is different and how it plays out will reflect those differences.
Contact a Smart, Compassionate Chapter 7 Bankruptcy Attorney in Northern Arizona Today
Filing for bankruptcy is a serious matter. It is a hard decision for anyone to make, but if made correctly and if undertaken with care, the end result can be freeing. You will be able to start afresh. If you have questions or want to make sure you file your Chapter 7 bankruptcy timely and properly, contact The Law Offices of Shawn B. Hamp today.